Since 1 January 2026, the EU's Carbon Border Adjustment Mechanism (CBAM) has been in its definitive phase, tightening rules for Indian exporters. It covers specified imports (iron and steel, aluminium, cement, fertilisers, electricity, hydrogen), pricing their embedded emissions. Payment for 2026 imports starts in February 2027; yearly declarations and certificates are due by 30 September 2027. It aims to stop carbon leakage by matching the carbon cost EU firms bear under the EU ETS. Indian MSMEs struggle with costs, paperwork and verified supplier emissions data. A June 2026 ICRIER study estimated Indian iron and steel shipments to the EU could fall 23.94% at US$86.01 per tonne of CO₂.